Clark Howard's Tips
September 6, 2007
Clark says he needs to get better about talking in "shorthand" -- using specific industry terms without fully explaining them for the average listener. He sometimes forgets that most people just aren't as familiar with these words. This is especially true on the topic of investing.
One example is the term "asset allocation" -- less than one in five people knows that it means to "diversify" your funds, or, not put all your eggs into one basket.
Clark wants to define these things more clearly for listeners in the future.
Bonds are another topic not fully understood. Here's how they work: A company or organization needs money and issues some bonds. People buy the bonds, get the interest promised, and ideally, hold onto them for the life of the term in order to get the purchase price back at the end. But let's say you have a bond that promises five percent interest, and now interest rates are at six percent. The issuing company would have to discount the initial price of the bond to get people to buy them.
On the other hand, if a bond is paying higher interest than the current interest rate, it's worth more, and will therefore cost more to buy. So, as interest rates go up, the value of bonds go down, and vice versa.
Another misunderstood topic is Roth IRAs, which are investments that allow you to save money tax-free.
But if all these terms bore and confuse you, read Clark's online investment guide. He lists what he feels are the best companies and services that can help make retirement investing much, much easier for you.
|
More Clark Howard Money Management Tips
Full list
|
Consumer advice courtesy of
|
